Collaboration between business angels and crowdfunding platforms

Collaboration between business angels and crowdfunding platforms

3 opportunities for collaboration between business angels and crowdfunding platforms
Crowdfunding and investments by business angels are often seen as mutually exclusive. At Connect we see things differently. We believe there are exciting opportunities for collaboration that brings benefits to both type of investors – and at the end of the day makes it easier for early stage companies to access capital necessary for growth.

Less risk, more money
The opportunities come from the complimentary nature of the solid investment knowledge of experienced business angels and the market validation mechanism that the online crowd provides. Connect has identified three areas that we want to explore together with our business angel network and FundedByMe.

1) Market validation
Sometimes otherwise interesting early stage deals may have question marks related to the actual interest from the market. A campaign on a crowdfunding platform such as FundedByMe can be used to validate market interest for the service or product and provide a business angel or business angel network with valuable data to help making a better investment decision.

2) Syndication
By combining their investments with online investors an experienced business angel could take the lead for a larger round with a smaller amount. This opens possibilities to engage in more deals and build a more diversified portfolio. Crowdfunded investments could also be used to fill rounds where a sole investor might not be able to meet the funding requirements by the company.

3) Improved trust
Knowing that an experienced lead investor is participating in the deal can make less knowledgeable investors feel at ease. The lead investor provides his or her experience from due diligence and company valuation processes and builds trust for the deal and reduces risk. It also creates a natural learning opportunity for new investors to become better investors over time.

“Collaboration between crowdfunding platforms and business angels is a natural development that benefits entrepreneurs as well as investors”

Connect and FundedByMe explore new models
Connect has the largest network of connected business angels in Sweden and in the Stockholm area more than 140 investors are connected to the network. Through the recently signed collaboration agreement with FundedByMe these investors will be offered new ways to interact with the crowdfunding platform and the online investors at FundedByMe.

Connect’s business development program for early stage companies Språngbrädan, is a proven process to help companies become investor-ready. Through the collaboration with FundedByMe we are creating new ways for companies on FundedByMe’s platform to improve their chances to reach their funding goals.

Companies that have participated in Språngbrädan will also be given special opportunities to participate and be highlighted on the platform.

This was a guest blog post brought to you by Connect – a proud partner of FundedByMe

Announcement Brokerstars

Some weeks ago we received worrying reports from investors in Brokerstars, who crowdfunded on FundedByMe April 2014, we have since tried to understand the problem by proactively reaching out to the entrepreneurs through various channels with no success.

What we have received is some inside information, but we cannot confirm whether the information is true or false.

What seems to be a fact, however, is that due to a fall out between the founding team members they have not delivered on the plans set out. Unfortunately we believe this means that Brokerstars can be considered a failure.

It is therefore our duty as an open and transparent platform to inform you about this.

What have we learnt?
Investor relations and communication is key in any company and by not communicating with your network properly you do not only miss out on opportunities but in dire times this can mean the difference between being able to cope or to fail. Furthermore, by not communicating, you risk your reputation. Failing is one thing, but failing from the wrong reasons something completely different.

Moving forward we will now start to develop a plan that will involve all future entrepreneurs. Most likely a binding contract or clause holding them to a communication plan. Investors putting their trust in entrepreneurs should never be kept in the dark.

For more information the former CEO of Brokerstars Jesus M Santos has made himself available and can be reached via email – txsantos@gmail.com

Please note that mr. Santos is not responsible for the failure rather the one most willing to cooperate.

Estimating crowdfunding reward delivery dates

This is part 4 of a 4 part series on rewards for crowdfunding campaigns.

Rewards fulfilment is probably the most challenging part of crowdfunding, because from the moment you launch, everyday its’ a race against time to get perks out your door, and into your backers hands. There are just too many unforeseen variables for reward delivery.

Here are just some examples:

  • Manufacturer parts are incorrect or not working
  • Shipping, or material costs increase unexpectedly
  • Delivery parcels get stopped at customs inspection checkpoints
  • Inability to fulfil rewards in time due to manufacturer delays

Getting overfunded is a good thing, but along with it comes the additional work of managing backers and fulfilling the additional rewards needed. You’ll need to buffer in additional time for all these, and have plan B contingencies in place to deal with them.

So it’ll do you good to triple the original length of time you’ve planned for rewards to be fulfilled. If you’ve originally forecasted that 3D printer to ship in 6 months, set the estimated delivery date 1.5 years later instead. This will help properly manage your backers expectations early on.

Basically under promise, over deliver.

How to price rewards?

This is part 3 of a 4 part series on rewards for crowdfunding campaigns.

Pricing rewards is more art than science. There’s no one formula to determine the best pricing for your rewards, because there are just too many variables to consider; perceived value, market competition etc. But here are some key things you should not miss out:

Start By Totalling Up All Product Related Costs
Pricing rewards is best done only after you’ve factored in all relevant product related costs, so that you can effectively project revenue. Or else you run the risk of making a loss. These costs include manufacturing, marketing, design, shipping, labour, perks etc.

It’s Quite Normal For Shipping and Fulfilment Costs to Overrun
Manufacturing and shipping delays all cost extra money, so ensure that you price your product is priced sufficiently high enough as a buffer to cover those sudden increases.

Aim For Rewards That Don’t Cost You Anything, Yet Give Backers a Great Experience
For example, it doesn’t cost a single cent to offer your backers the chance to visit your office and have coffee with the founders. Furthermore, your backers experience a deeper connection to your business.

Also, Take Note that Backers Will Likely Spend Between €20-€50 on Average for Each Pledge
It is not the focus of this book to go in-depth into the psychology of reward pricing, But if you want to read more, check out this well written article by Jay Ehret on pricing stuff: Three Predictably Irrational Pricing Strategies That Get The Sale.

3 best practices for planning your crowdfunding rewards

3 best practices for planning your crowdfunding rewards

This is part 2 of a 4 part series on rewards for crowdfunding campaigns: crowdfunding rewards

3 Rewards Best Practices

  1. Tangible rewards > Intangible Rewards
    Tangible rewards triumph intangible rewards, anytime.Let’s say you are creating the next big social networking site. It’s the next Facebook for pet owners, and you’re crowdfunding it. And I told you that if you backed my project for €20, I would give you beta access to the site once its launched. Would that be a convincing reward to part with your money?Now let’s take the same scenario, and instead I told you that if you backed my project for €20, I will give you an early bird T-Shirt with our logo, and your name imprinted on it. Now, doesn’t that sounds like a more convincing reward?Why were you more convinced with the T-Shirt reward? The difference was that with the T-Shirt, you had something physical to touch, while with the beta access, you cannot touch it.

    And that is why hardware and art craft crowdfunding projects have traditionally tended to succeed better than software, or publishing projects. Not all crowdfunding projects were created equal, and certain projects such as software ones tend to be more on the intangible side.

    That said, there are many creative ways to make intangible rewards appear more ‘tangible’. Film and video crowdfunding projects are a good example of intangible projects that have done surprisingly well. A common perk tactic that is used for film projects, is to get backers to participate directly in the film itself.

    Now, how awesome would it be to tell your friends to watch that scene in the movie, and tell them that you narrated that waiter’s voice?

  2. The €1 Donation Perk
    This is a perk that is often overlooked. Do not underestimate the power of the €1 donation perk!The greatest advice I ever heard about setting perks, is that you’ll have to give people a way to easily share your campaign. That’s because the majority of visitors to your site might not necessarily back your flagship rewards, like a €150 smartwatch. But the good news is that they are still interested in your crowdfunding project, and are willing to show their support. It’s just that they have a much lower risk appetite, or are financially strapped at the moment.The €1 perk is very low-risk way for these group of people who by the way, happen to be the silent majority. And the patterns largely the same; whether you’re a backer who has a higher risk tolerance, or a low-risk one, the likelihood is that you’ll tend to share the campaign with your networks after you’ve backed it.
  3. The early bird perk
    The early bird perk is a set of reward tiers that is rolled out at the beginning of your campaign, with the price of your product increasing over time. They usually start at a discounted price, and with a limited quantity. For example, offer 10 limited units of an item at €19, and then when they sell out, offer the next set of perks at €29 for the same item. Take note that for early bird perks to work their magic, the discount has to be significant enough. A good discount percentage would be at least 20% of the shelf price.We’ve found that early bird perks worked very well to quickly drive initial adoption, and brought three benefits for previous crowdfunding campaigns.It attracts and makes early adopters feel special. Your first backers are likely to be early adopters. These are people who like to be at the cutting edge of things, and they love to have the latest stuff: the latest wearable tech, the latest indie movie film etc. And it gives them even more bragging rights to their networks, when they were able to get these limited quantity perks at a discounted price.

    It’s a great way to validate pricing early on. From the response of the early bird perks, you will be able to roughly tell if people perceive your product as being priced too low, too high or just about right. With this knowledge, you can then quickly make price changes in your subsequent perks.

    *Note: FundedByMe will not allow you to adjust your perks as long as somebody has already claimed it. You’ll have to create a new perk if you wish to adjust the price.It’s a great way to forecast what perks work/don’t work. You might discover that people might generally favour a certain perk, while other perks do not work as well. You can then adjust the type of perks in subsequent perks.

Crowdfunding rewards – What’s in it for me?

Crowdfunding rewards – What’s in it for me?

This is part 1 of a 4 part series on rewards for crowdfunding campaigns: crowdfunding rewards

Your reward perks make or break your campaign. If your reward perks are not well-planned, you will lose the interest of potential backers. You might have a convincing video and a well crafted pitch, but it’s the reward perks that sweeten and close the deal.

We wish to make-believe that our community browses them daily to find crowdfunding projects to fund. The inconvenient truth is that most people are naturally self serving, and they are actually thinking: “What’s in it for me?”

That is why when you decide on your reward perks, you’ll have to think in the shoes of the backers. Also, this is the time to be creative, and offer your backers rewards beside the core product or service offering.

Some examples of popular ‘What’s in it for me’ perks are:

Tangible perks:

  • Product Add-ons (eg. watch straps)
  • Limited edition collector item sets
  • Protective Case
  • DVDs
  • Paper Toy
  • T-Shirts

Agnese_Tee_image_full_width

Intangible perks:

  • Having your name credited on campaign website/donor walls
  • Personalised consultation over Skype
  • A meal with founders
  • Tour of the office
  • Participating in cameo roles (Film & Video, game projects)

någon annan betalar credits

In part 2 we’ll discuss the 3 best practices for planning your rewards

The lead investor

The lead investor

What is a lead investor?

When raising capital for your company finding a “lead investor” is a critical piece to the overall puzzle.

A lead investor is someone that is willing to put in time and effort to help you secure that first investment.
This person won’t put in the whole amount needed, but will give you that initial feedback and help prepare you for further conversations to convey trust and quality with other investors.

Note: Typically this person might negotiate a better rate, this is okay as long as they put in the work needed. Make sure that this investor is willing to help with introductions to other investors.

Lead investor = trust and quality

When you have a lead investor it will make it easier to connect with other investors because this shows traction.

From a philosophical point of view if you walk past a restaurant that is empty you will just keep walking, right?
Why send a bunch of investors to a campaign page that shows zero traction.

If an investor can see that other investors are onboard, then in their eyes this means that the deal has been vetted and they are more likely to stay and engage with your campaign.

Note: A lead investor should not be your mom or dad. This does not convey trust and quality.

Size matters

Typically speaking a lead investor will put in 15-20% and make themselves available to speak with other investors.
A lead investor is different from sweat equity, make sure to get that first commitment.

Don’t start a round without one

We won’t stop you from starting your round if you don’t have a lead investor, however having one will make your life easier when taking in capital for your company during an equity crowdfunding round.

Example companies that have used lead investor(s) in their round

What do investors look for in a pitch deck?

What do investors look for in a pitch deck?

More entrepreneurs are moving to a pitch deck format, tackling the biggest questions and trying to digest the idea behind their company as quickly as possible.

All the reference photos are taken from AirBNB’s first pitch deck.

Elevator Pitch

A quick one-liner summary that combines your vision/product and the mission of your company

Keep it short and memorable

  • Try: making it relatable… as in “We are X for Y”
  • (“We are AirBNB for Event Spaces”)
  • (“We are Tinder for grannies”)
  • (“We are the Starbucks of Frozen Yogurt”)

Elevator pitch

Team

  • Highlight key team members and their prior positions, successes, domain expertise
  • Demonstrate relevant experience
  • Which roles are the keys to success in your company/space?

The Problem

  • Define the real problem that you’re trying to solve.

the problem

The Solution

  • What solution are you creating and how will this solve the problem mentioned above?

the solution

Market validation

  • Show your timeline and milestones to date
  • Growth metrics are key at early stage

Market validation

Market size

  • Define Your Market: What business/space you are in
  • Total Market Size: Dollar Size, Your Place/Niche
  • Customers: Clearly define exactly who you serve
  • Macro Trends & Insights

market size

Product

  • Tell the story of your customer and how customers use/value your product or service
  • Images and visuals are better than lots of text: show don’t tell

the product

Business model

  • Who is your primary customer & how do you make money?
  • What is the pricing / model?
  • Revenue and number of customers to date.

business model

Market adoption

  • Highlight press, partnerships, accolades
  • Customer success stories and/or testimonials

market adoption

Competition

  • Where do you exist in the larger overall Market Space?
  • What are your Advantages?
  • How is your place in the market unique to you, and the right one for your company growth and customers?
  • Who are the competitors, why have they succeeded, and how do you truly differentiate from them?

competition

Investment ‘Ask’

  • Who are your existing & notable investors, if any?
  • What are your key Use of Proceeds (as % of total raise)
    • Founder salaries
    • Sales & Marketing
    • New hires
    • Technology / Product or Service development
    • Capital expenses / equipment

FundedByMe offers you the ability to create your presentation and present it to investors online. Make sure you structure your campaign to tackle most of these questions, that way you will maximise your fundraising round.

Downloads available:

Campaigns that incorporate this in the right way

All pictures are sourced by BusinessInsider and the original pitch deck can be found here.

Yoogaia pulls in €500,000 from venture capital.

Yoogaia pulls in €500,000 from venture capital.

Interested in raising funds for your own company and considering crowdfunding?
One of the biggest questions from entrepreneurs, does a crowdfunding round impact future fundraising?
How will other investors look at my company when I have 100’s of smaller individuals?

Those questions have now received a decent answer.

3 months ago Yoogaia listed on FundedByMe and raised just under €100,000. The success of their campaign has definitely excelled them into a different space and subsequently gone on to raise money from Inventure, a leading stage venture capital company based in the nordics.

Yoogaia will use the €500,000 to further establish themselves and help them establish their service abroad.

You can read the full Techcrunch article here.

After the crowdfunding: Jascha opens the first store

After the crowdfunding: Jascha opens the first store

 

We went to Jascha’s newly opened store in MOOD Stockholm to see what the hype is about. A year after their crowdfunding on FundedByMe we got a talk with Jonas, one of the founders:

How long have you been working with fashion?

I’m born with fashion. My mom is a designer. She’s been working with it since I was a kid. My older brother is Jascha. He started the brand 12 years ago, then me and my other brother started this company 5 years ago. We had a store at Odenplan before, where we had a mix of fashion and interior decoration, but wanted a pure Jascha store. We have built this store to show what Jascha stands for, we can present the whole collection and concept in a unique way. We are going to develop it more, and if it succeed’s, this store will look totally different in six months from now.

What is Jascha all about?

Our focus is fit and quality with distinct details, which is unique. There are many brands that work similar but more minimalistic. Not many in Sweden works with the distinct details like we do. The typical Jascha customer is a business woman, 30-35 years, that has good economy, although it’s not expensive. A dress is 1 200 – 1 600 kronors. Its not more expensive than our competitors.

What’s your plan?

To expand. This store is an experiment. The plan is to build a small chain of stores to start with, in Stockholm. The city is big enough to hold several stores. Then we will evaluate after a couple of months. The most important with the store is not the cash, but to see what potential it has. You have to be alert all the time, it’s an industry in constant change. You are on your toes all the time.

                                                                        Foto 2014-10-09 10 34 57 (1)

Last year you raised 500 000 SEK on FundedByMe, what happened after that?

Our pitch was to increase gross sales and export, which we did. We reached the goal for turnover that we had in the prospect. I got into crowdfunding when I was at a party and a friend of a friend said he planned to start a campaign for his website. I got interested since i had been thinking of how to raise money in an easy way. I googled FundedByMe and saw there was soon to be an introduction meeting, so I went. I knew I could present it well but was unsure of how many investors that was connected. I got surprised of how many serious investors there was in the network.

How much is ethics involved in the making?

It is important but difficult in this industry. We have barely no production in Asia, where it would be hard to control it. We work in Eastern Europe so we can go visit the factories easier. It’s  a murdering competition in this industry when it comes to production. If I would make this product Fairtrade etc, I would have to charge a whole lot more for the clothes. In difference from other products, people dont value ecological and ethical products when it comes to clothes. When people buy food they are willing to spend more for that kind of products but it havn’t reached our industry yet. I think the mindset will come more to clothes too. We work with ecologic materials like viscose that is way more friendly to nature than cotton is.

Jonas gives a tour of the store including it’s many custom built solutions, made by themselves:

There are still some things to be installed. It’s gone very fast. We are just seven people in the company including store clerks. The four people in the office do everything from designing, marketing to going to fairs. We are known for being very fast and it’s all about focus. We signed the contract for this store just six weeks ago, opened the doors yesterday and will throw a inauguration party here in two weeks.

Foto 2014-10-09 10 36 04